Welcome to The Navigator Company conference call. I will now hand over to Joana Appleton. Please go ahead.
Good morning, ladies and gentlemen. Welcome to Navigator's company earnings conference call for Q4 and the full year of 2018. We will start, as usual, with a presentation on our results. Our CEO, Diogo Silveira, will make some remarks on the main achievements of the period and our financial figures, will be followed by the pulp and paper market comments. Nuno Santos will provide a brief update on the Cacia project and the Mozambique project. João Paulo Oliveira will speak also on our next projects related to the bioeconomy area. We will finish, as usual, with a Q&A session. First about the results, and then Diogo will also be available to answer questions on the end of his mandate. The presentation can be accessed to the links available on the website. Questions may also be addressed to the webcast platform. I will now hand over to Diogo.
Diogo, please.
Good morning. Thank you for joining us today. I am very pleased to comment on the great set of results that we have published this morning. We managed to overcome some difficult challenges that occurred throughout the year, and we actually registered the best performance in the history of the company. Let's start and go over to slide number three. 2018 was a record year for turnover, EBITDA, and net profit. The sales were just under EUR 1.7 billion, growing 3.3% year-on-year. EBITDA to the EUR 455 million, increasing 13% and reflecting an EBITDA over sales margin of 27%. This was achieved in a year where we faced several challenges, mainly in the terms of our industrial activity. We had some prolonged production stoppages in our mills, some planned, others unplanned, which severely limited our volumes available for sale. Specifically, Q4 was impacted by two major events.
Hurricane Leslie, which landfall caused property damages at our Figueira da Foz industrial site and forced to stop production for almost a week. With the efforts and remarkable performance of our local teams, combined with support and engagement from various areas in the group, the work on repairing the damage was immediately started and allowed to minimize the stoppage with the pulp line and paper machines one and two quickly going back into operation. The second event was the partial conversion of our PM3 at our Setúbal site in December, which allows for production of heavyweight. This involved the production stoppage that affected, of course, also the volume of paper available for sale. We were, however, able to offset the production loss with higher prices for both bleached eucalyptus kraft pulp, paper, and also tissue.
The different stoppages implied, of course, higher cost and all of our efficiency measures and cost reduction processes assumed a very particular relevance. We managed, however, to achieve EUR 21 million of positive impact on our EBITDA for the full year. Alongside the operational difficulties, we concluded two major growth projects. The expansion of pulp capacity at Figueira da Foz and the construction of the new integrated tissue plant in our Cacia mill in Aveiro. This last investment allows Navigator to double its tissue capacity and become a relevant and efficient player in the Iberian Peninsula. In addition to these two major projects, we also invested in the partial conversion of one of our paper machines, which I just referred to, which allows for the production of heavyweight paper. Complementing our portfolio of paper products. CapEx in 2018 totaled a significant amount of EUR 216 million.
Still, in a year marked by high growth CapEx, we managed to record free cash flow of EUR 211 million. Free cash flow was positively impacted, let me remind you, by the sale of our pellet business, but also by a careful management of working capital. On the negative front, free cash flow was impacted by our anti-dumping duties that I will come back to. Those were the anti-dumping duties, clearly one of the major challenges we did face in 2018. As you all remember, we were surprised by a notification by the U.S. Department of Commerce in August of a tax rate of 37.34% applied to our paper sales to the U.S. after being notified just a few months earlier of a provisional rate of 0%.
After significant efforts, the group managed to prove that the previous rate was an error and the rate was therefore revised down to 1.75%, supporting Navigator's claim that it does not engage at all in anti-dumping practices in its commercial activities in the U.S., nor anywhere else for that matter. Unfortunately, this had those several consequences for the company, mainly in our commercial activity. This anti-dumping issue also deeply impacted our share price. We believe the impact of the initial rate was clearly overestimated by the market, and even after the revision of the rate, the share price never recovered actually. This has led Navigator to initiate, at the end of the year, the purchase of own shares in a clear sign of confidence in its shares. We did buy approximately 1.2 million shares during December and January, with a total investment of EUR 4.6 million.
When reviewing 2018, I need to acknowledge another important event that deeply impacted the group. The passing away of our chairman and main shareholder, Mr. Pedro Queiroz Pereira. Even though he was not involved in our day-to-day business, he was our charismatic figure and a reference for everyone within our group of courage, entrepreneurship, and human values. He will be deeply missed. Just to finish our overview of the year, there is one key aspect that I would like to transmit here today, and it is the incredible resilience of The Navigator Company. This was a strong year, of course, for the pulp and paper industry in general.
When faced with all the operational, market, and regulatory challenges mentioned, we managed to overcome these difficulties by working in a coherent and consistent way, proactively increasing paper prices, focusing on constantly improving performance, and working in a more innovative and sustainable way. This resilience is very clear when we look at the performance of the group over the last years, as shown on slide four. We have shown consistent and strong results in a sustainable way, growing and becoming more profitable. I will now go to slide six, where we can see that 2018 was a very positive year for pulp prices, namely hardwood pulp, which increased on average $212 a ton year-on-year. That is 26%. EUR 151 per ton year-on-year as well, which is 21%, this, of course, over 2017.
Actually, softwood pulp prices also increased significantly, over $286 per ton, + 21%, and high operating rates allowed for a large increase in softwood prices throughout the first half. This amplified the price gap between both fibers, long and short, and provided support for additional price increases in hardwood, which remained at a price level of $1,050 per ton for 30 consecutive weeks. It was only at the end of the year that pulp prices started to correct, with softwoods being particularly hit. Going to slide seven. We have a brief wrap-up of the main drivers behind the pulp market in 2018. We saw the increase in available pulp due to the ramp-up of the new capacity that started last year, namely, of course, from Latin America.
At the same time, there were quite several planned and unplanned stoppages throughout the world that reduced pulp availability on the market. This allowed prices to remain at a very stable level throughout the second and the third quarter. Demand for BHKP was strong in 2020, and it is estimated to have grown around 2.5%. There was some slowdown in activity in China that we believe resulted from a combination of factors impacting the Chinese economy. The trade wars between China and the U.S. created a major uncertainty and instability in the business climate, which together with the seasonal activity decline, resulted in a slowdown of economic and industrial activity in China. This led to some downtime among paper and board producers, and there was also some destocking from pulp end users.
Nevertheless, we believe these to be temporary issues and that the fundamentals for the pulp industry remain strong. There is no significant capacity coming to the market in the coming two years, at least. Demand is estimated to continue to increase at current levels or above. There were new paper capacities starting in China in 2018. 1.3 million tons of tissue and 1.2 million tons of uncoated woodfree, which impact on demand for pulp will be felt mainly this year, 2019. More recently, some actions from several pulp producers that curtailed production and increased own stock have led to a more balanced market and a price adjustment. The conclusion of the merger between Suzano and Fibria in January has created a global pulp group, which has already taken some initiatives contributing to improve market stability.
Going now to the paper market on slide eight. Figures from PPPC show that uncoated woodfree papers continue to be the best performing printing and writing grade globally. With uncoated woodfree paper demand decreasing less than 1% in 2018, whereas unfortunately, other types of paper experienced significant demand reduction during the same period. If we go to slide nine, we summarize what we believe are the specific conditions of the uncoated woodfree market. We can say the global market conditions continue stable, even though with some differences among regions. Uncoated woodfree demand was stronger in the U.S. than in Western Europe. Used to be the reverse, but this year this was clear. This was with regions trending in opposite directions during the year.
That's to say, Europe performed better in the second half versus the first half, with some major central and southern European markets showing even year-on-year growth. On the other side, the USA actually performed better at the beginning of the year and then cooled in the last months of 2018. Recently, we saw additional announcements of capacity closures, mainly in the U.S., with Georgia-Pacific completely exiting the uncoated woodfree business by announcing the closure of its Port Hudson mill at the end of Q1 2019. This represents approximately 570,000 tons less in uncoated woodfree production in the U.S. market, which is almost 8% of the U.S. capacity. We believe that this closure, together with the growth experienced in consumption in the major European markets during the second half of last year, will create a more tight demand for uncoated in the near future.
Actually, we already see positive signs for orders in January. These recent developments have also led to price increase announcements in the U.S. for implementation at the beginning of next month. Let's say March. Taking a closer look at prices for uncoated woodfree on slide 10, we see that the main index, A4 B-copy, performed very positively during 2018, gaining 7% on average versus the same period last year, and ended the year at over EUR 905 per ton. This positive trend is continuing, and the latest value for the index shows a level of EUR 417 per ton. The price increase announced by Navigator for the European market at the end of last year is being successfully implemented since mid-January this year. I would like now to go over the group's performance into some more detail, and for that, I suggest we move to slide 12.
In paper business, uncoated wood-free sales totaled 1,513,000 tons, down by 4% on the previous year, due essentially to production deviations caused by unplanned stoppages already mentioned previously. As a result of implementing a series of price increase over the year in Europe and other geographical regions, Navigator benefited from an average price 8.5% higher than 2017. Average price. This allowing it to offset in value the reduction in volume sold, meaning that still sales grew by 4% to EUR 1,248 million. This 8.5% increase in Navigator's average prices clearly outperformed the European benchmark index, the FOEX PIX A4 B-copy, which rose 7.1% to EUR 873 per ton. Navigator's average price was positively influenced by a significant improvement in the product mix in terms of quality, 55% premium sales up from 49%, and in the proportion of mill brand products, 69% up from 62%.
On the negative side, this was countered by evolution of the euro-dollar exchange rate. As you know, the average exchange rate for the period was 1.1815, which compares to 1.1292 in the previous year. Regarding our pulp business on slide 13, we see that sales volume totaled 253,000 tons in 2018, down by 18.5% on the figure recorded in 2017. This reduction in volume was completely offset by the increase in sales price, and sales in value showed an increase of 1%, standing at approximately EUR 167 million. Rising net sales price was due to market conditions and also to the growing proportion, again, of sales represented by value-added segment. As you know, we're specifically strong in decor and specialties, and the weight of that segment was up from 62% - 73% in 2018.
This improvement in the sales mix permitted the rising Navigator average sales price up 25% to outperform again the market index. Going over to the tissue business on slide 14, there was an upward adjustment in the average sales price in relation to 2017, up 7.5%. As a result here also of an improved product mix with reels representing a smaller portion of sales and therefore finished products a larger portion. Also due to price rises implemented. Sales stood at EUR 91 million, 23% up from 2017 and included sales of finished products from our new tissue mill. However, rising average tissue prices were not enough yet to absorb an increase of approximately 30% in production costs, due above all, of course, to rising prices for hardwood pulp, which impacted our Vila Real plant, and also for softwood pulp, as well as actually for a number of chemicals.
In this context, our EBITDA totaled EUR 455 million, a record level for the group, representing an increase of 13% when compared to 2017 EBITDA as you can see on slide 15. This increase was due essentially to the significant price improvement of pulp and paper prices, which did offset volume. As we have mentioned previously, volumes had a negative impact on EBITDA and also some costs evolved negatively during the period. Production costs were again pushed up by a negative trend in chemicals. We estimate they accumulated an increase there of around EUR 10 million, with an impact on variable unit production costs for pulp, paper, and tissue. Fiber costs also increased by approximately EUR 14 million, due essentially to the purchase of short fiber, as just mentioned, for our tissue production in Vila Real and also the purchases of long fiber.
In overheads, personal costs presented the most significant increase, up by EUR 9.2 million to an increase in the estimate for performance bonuses reflecting the group's strong results, expansion of the workforce with the new tissue project in tissue and the rejuvenation program underway. We experienced an increase in these cost items that would have had a greater negative impact if we hadn't also worked on the cost reduction measures as we explain on the next slide. Contributing positively to EBITDA is, of course, the sale of the pellet business impact of EUR 30 million, which was partially offset by the negative impact of the anti-dumping duties, which we registered during the third and fourth quarter accounts. Total EUR 18 million negative impact. EBITDA figure for 2018 would have been EUR 460 million if those two impacts, the positive and the negative one, would not have occurred.
We also registered a negative impact on biological assets in Mozambique of approximately EUR 6.7 million, which of course also negatively impacted our EBITDA. As referred to previously and moving to slide 17, let's look at the results of our M 2 program, which we have presented to you already several times and that is ongoing since 2016. The program achieved a positive impact this year of approximately EUR 21 million year-on-year on the EBITDA. Roughly 99 new initiatives were launched in the past of the year to cut costs, with 84 of these achieving a positive impact within 2018. We thought we would share with you some of the most successful initiatives so that you get a flavor for the program.
Initiatives on one side related to reducing long fiber consumption at the Figueira da Foz mill as a result of steps taken to control operations and raise employee awareness. Kaizen type of approach. This had an impact of over EUR 2.5 million in 2019. Second example, a new system for managing wood chip stacks also actually at the Figueira da Foz site, which generated savings we estimate of EUR 2 million just by cutting specific consumption of wood. Last but not least, several cross-group projects designed to optimize logistical routes, namely in shipping and inland transport, are estimated to have contributed to a saving of EUR 2.2 million in 2018. These are just a few examples of the measures with the highest impact, but our goal is to consistently work on our global efficiency in a way to achieve continuous improvement of costs and operational efficiencies. Go to slide 17.
We have now some detail on the evolution of our free cash flow, which stood at an impressive EUR 211 million. Specifically if we consider that our CapEx figure for the year was even larger, EUR 216 million. Free cash flow was positively impacted by a strong operating cash flow, as well as an inflow from the already referred sale of the pellets business. Cash-wise, the impact was EUR 68 million. At the end of 2018, as you can see on slide 18, the group's net debt stood at EUR 683 million, down by EUR 10 million from year-end 2017, reflecting both payment of dividends of EUR 200 million and capital expenditure of EUR 240 million.
Net debt to EBITDA stands therefore at 1.7x, we see as a comfortable level, and is already reducing from the peak level of 1.7x achieved within the year, actually at the end of June. A couple of additional details regarding our debt profile can be found on slide [19].
At the end of December, our total debt had an average maturity of 2.6 and an average cost of 1.6%, with a significant portion of the debt being fixed, actually 68% versus 32% variable. The company is currently working on extending the maturity of its debt and diversify its sources of funding. We are actually pleased to announce in that respect that the group very recently signed the first green commercial paper in Portugal in the amount of EUR 65 million and with a term of seven years. The financing conditions are linked to the environmental, social, and governance classification, that's why it's called green, which is certified by an independent environmental agency. Navigator already has a very good ESG rating, and in case of improvement, it will see its financial conditions further enhanced.
This is yet another demonstration of the Navigator's company commitment to social and environmental responsibility. Going to slide 20. We see our financial results, which showed a loss of EUR 22.5 million, which do not compare positive to a loss of only, quote, unquote, "EUR 7.7 million in 2017." Despite positive trends actually in the cost of group operations and funding, a combination of other factors had a quite negative impact on our financial results. I would like to share three of the most important ones. First, we had a drop of EUR 10 million in gains on currency hedges taken out by the company. Second, a reduction of EUR 3.3 million in the results from our investment of surplus liquidity in, of course, the context of generalized slump in financial markets.
Third, recognition at the end of the first quarter of a negative figure of approximately EUR 1.5 million, resulting from the difference between the nominal and the current value of the amount still receivable for sale of the pellets business. We had referred this already previously, but it still holds, of course, also at the end of the year. Finally, our CapEx is detailed on slide 20. Navigator recorded annual CapEx of EUR 216.5 million to be very specific, and a fourth quarter figure of EUR 68 million.
Expansion CapEx of this total represented approximately EUR 129 million and was the most relevant value, of course. We have already mentioned the main expansion projects. The tissue project representing EUR 83 million in this period, and the capacity expansion figure that falls around EUR 37 million in this period. Finally, the partial conversion already mentioned of our PM3 for heavyweight did represent around EUR 8 million.
If we look at maintenance and recurring CapEx, this totaled EUR 81 million and included, besides the regular maintenance, the capitalization of certain costs relating to production stoppages as well as the damages caused by Hurricane Leslie at the Figueira da Foz site. We will briefly make a wrap-up of the most relevant projects, and I hand over for that to Joana Appleton.
Yes. Going now to slide 23, we have the expansion of the pulp capacity in Figueira da Foz. 2018 saw the completion and the start-up of what we call PO3, which is the optimization project number three of increasing its pulp production capacity at the mill, where nominal capacity was extended from 580,000 tons to 650,000 tons per year. This project also entails a series of important environmental improvements with significant overall impact at the Figueira da Foz industrial complex. One of the aims was to improve efficiency in the production process, cutting specific consumption of wood and chemicals, and also implementing best environmental practices. The group actually contracted a loan of EUR 40 million from the European Investment Bank to finance this project. This project's aim of increased efficiency and significant improvement in environmental factors is clearly in line with the institution's declared aim of fighting climate change.
The loan contracted is repayable in 10 years from the issue, and was only issued actually in early 2019. If we go now to the next slide, just a few comments on the conversion of the PM3 machine in Setúbal. The conversion project was completed in the fourth quarter on Paper Machine 3 at the Setúbal industrial complex, equipping the machine to produce paper with grammages between 135 and 300 g /sq m , involving a global investment of EUR 11.8 million. Converting the paper machine to produce heavyweight entails adding new equipment and modifying existing equipment to ensure that the company will produce papers that can position themselves at the top of the quality range in the heavyweight market.
The heavyweight segment is one of the complements current grammages of 60 to 120 g/sq m , in particular in the printing segment, which accounts for around 1/3 of the folio and uncoated wood-free business in Europe and approximately for 7% of all the uncoated wood-free business in Europe. By producing its own heavyweight papers, Navigator will be able to exploit more business opportunities, complementing its existing portfolio with quality heavyweights, permitting the company to develop a sales presence in a market niche with excellent prospects for growth. The aim is to achieve outputs of approximately 35,000 tons per year at cruising speeds. I will now ask Nuno Santos to comment on the tissue and Mozambique project. Nuno?
Thanks, Joana. Going to slide 22 on the new tissue mill in Cacia, which I think is actually slide 24. As Diogo previously referred, the completion of the project for the group's new tissue mill in Cacia represents an important milestone for the group and an attainment of its strategic goal mapped out in 2015. To position Navigator as the third largest tissue manufacturer in Iberia, with total production capacity of 130,000 tons in mother reel and converting capacity of finished products of 120,000 tons per year. The new mill, equipped with large scale sophisticated industrial assets, is integrated upstream with pulp production, giving it competitive advantage in terms of production costs, use of the high quality eucalyptus pulp manufactured in Cacia, and an excellent location near the port of Aveiro, which will allow it to sell these products to more distant markets.
The various production lines started up over the second and third quarters, with the consumer line starting production in May, followed by the paper napkins and industrial tissue lines in July. Mother reels production started in September and is still ramp-up phase. A word now on Mozambique. As reported to the market on July 9th last year, Portucel Moçambique and the government of Mozambique have signed a memorandum of understanding concerning the company's revised investment plans due to be implemented over two phases. In the first phase, if condition precedents are met, Portucel Moçambique will create a forestry base occupying 40,000 hectares to supply future units producing eucalyptus wood chips for export. Total investment is estimated at EUR 140 million for annual exports of around 1 million tons.
Portucel Moçambique and the government have set up a joint team to work to ensure that the condition precedents for advancing with the investment plan are met. This will involve and is involving establishing the logistical infrastructures needed for exporting wood chips. The first phase of the project is accordingly conditional on satisfactory resolution of the condition precedents identified in the memorandum of understanding signed with the government of Mozambique. These conditions have not yet been met. In view of the absence of an active eucalyptus wood market in Mozambique and the fact that conditions are not yet in place for the wood chip mill, the company recorded an impairment related to the fair value of biological assets located in the Zambezia province with a value of EUR 6.7 million.
Although the MoU signed with the Mozambican government contained a best endeavors commitment with a view to achieve readiness for the chip mill project by December 31st last year, this proved not to be possible, and both parties continue to work to achieve this aim. In view of the situation, Navigator decided for the sake of prudence to record not just the respective impairments, but also an additional provision of EUR 12 million in its accounts at year-end 2019 hedged against the current scenario identified above. Back to you.
Thank you, Nuno. Now just a few words on our outlook for 2019. As said earlier, there are no significant new increases in production capacity or market pulp being announced for the next three years
Capacity utilization rates can be expected to increase and to allow hardwood pulp prices to stay at or above the $1,000 per ton mark in the coming years. After the Chinese New Year, paper and board production is expected to rebound and boost market demand. In uncoated wood-free paper, demand in Europe is expected to revive in the early months of 2019, principally in the markets of Central, Southern, and Eastern Europe, most of them in a way. In the U.S., the potential drop in uncoated wood-free demand will be more than offset by the already referred to closure of capacity of more than 550,000 tons by Georgia-Pacific in March this year. This will certainly tend to push prices upwards.
Already in early February, in line with other U.S. paper manufacturers, Navigator announced to its customers a price increase in the U.S. market of $66 per ton, effective as from March 1st onward. In the tissue market, producers remain under strong pressure from rising pulp prices and from the cost of chemicals and energy. Navigator has successfully implemented the price increase for its products announced in November last year. At the same time, starting up its new tissue mill in Cacia helped us producing reels as of September. Commercial efforts made over the course of 2018 hold out the prospect of the new output being successfully placed with customers, and the company is committed to expanding its market share at above the average rate of market growth.
This overall positive context for 2019 may, however, be affected by increases in certain costs, especially energy, and there are also continued concerns about the evolution of exchange rates, both U.S. dollar to euro and British pounds to euro rate. The company continues to develop its business model, acting in a proactive way in the improvement of its performance and working in an innovative and sustainable manner. It was with great satisfaction that in January 2019, Navigator was distinguished by the Carbon Disclosure Project, CDP, as a global leader in corporate climate action, achieving a top place in the organization's climate change A List. The company was singled out for its actions in 2018 in reducing emissions, cutting climate risks, and developing a low carbon impact economy. It was actually the only Portuguese company to achieve the top rating.
This constituted public recognition of an important achievement by Navigator, which has announced its next aim: to be carbon -neutral company by 2035. This is 10 years above and before the government objective for the country as a whole. Just to finish, I will ask João Paulo to say a few words on some of our projects regarding the bio-economy. João Paulo, please.
Thank you, Diogo. Just to give you a brief context, The Navigator Company aims to diversify its activities while ensuring the sustainability and competitiveness of the core business, such as pulp and uncoated wood-free paper and tissue. One important pillar of business diversification involves the context of bioeconomy and the evolution of the company kraft pulp mills into true biorefineries where wood forest residues and processed byproducts are comprehensively converted into fiber products, bioproducts, biofuels, and new biomaterials. Bioeconomy projects involve research, institute R&D, upscaling and pre-feasibility levels, and the new corporate bioeconomy and partnerships division of Navigator at the business development and industrialization stage. Several projects are on the pipeline to reach industrialization and market. Essential oils from eucalyptus forest residues will be produced soon in the new industrial facility located at the Cacia mill. This will represent the first Navigator flagship on forest-based bioeconomy.
Second generation ethanol production from forest residue is at an advanced stage of industrial feasibility analysis. A final decision being scheduled to the end of 2019. The potential industrial production of fiber-based thermoplastic biocomposites is under technological and economic assessment. Other projects at an earlier stage of potential industrial development include the production of nanobacterial cellulose and fertilizers from kraft pulp mill residue. Part of this project originated from R&D developed at RAIZ institute, where The Navigator Company invested significantly in the last few years. RAIZ budget increased from EUR 3 million-EUR 4 million in 2015 to EUR 6 million-EUR 7 million in 2019. The major ongoing project at RAIZ, Inpactus project called Focused on Bioeconomy, involves a consortium with national and international universities and R&D centers, and a budget of approximately EUR 15 million for the next four years. Thank you.
Thank you, João Paulo. This concludes our comments on results. We are now ready for the Q&A, first on results, and then Diogo will also be available to answer questions on the end of his mandate. João Castello Branco, the Chairman of the Board, is also here with us, and he will make a brief statement at the end. Thank you.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please dial zero one on your telephone keypad or use the webcast platform for written questions. There will be a short silence while questions are being registered. Thank you. The first question comes from Bruno Bessa of CaixaBank BPI. Please go ahead.
Yes, good morning. Thank you for taking my questions. First one on prices and evolution. You said in the release that you are expecting pulp prices to recover to mid-2018 levels, which would mean a significant recovery from the levels we are seeing as of today. My first question will be related with the reasons why you see this price recovery, particularly considering that prices continued to decline, and also the fact that European and Chinese ports seem to be full of stocks at this stage. If you could provide a little bit more visibility on the reasons for your expectation will be good. The second one, also related with prices, but here in the paper front. I think you put in the presentation that you expect stable paper prices in 2019.
The fact is that paper prices are already around 5% above the average price that we saw in 2018. Are you expecting any kind of slowdown in terms of the paper price evolution going forward? What are the reasons why you are expecting this? Also related with this, because it seems a little bit contradictory. If you are expecting pulp prices to recover after this weaker seasonal demand period in China, wouldn't we expect a new price hike in terms of paper in the spring periods? This will be my second question on prices. The third one on the mix effect. You've mentioned this improving mix weakness throughout 2018. My question is, what are your expectations regarding the mix evolution during 2019? Thank you very much.
Very good. Thank you very much for your question. Actually, the second and the third, you will see that they are the same question. First question on pulp. Actually, the pulp prices have decreased in mainly November, December, slight decreases, but in January, prices are already again going back up. The reason why we believe that this will occur during the year is that actually it did already start. If we would be talking, say, a month ago, it will be tougher for us to support this view, but currently prices in China and in other areas of the world for pulp did already start to recover. Second aspect, we still believe that medium to long term, what runs prices is supply and demand, net of logistics impacts, destocking, some traders pressures, some tactical moves that can happen.
As we don't see any additional capacity and see the demand going up. We still see demand going up, namely in China. When people are concerned about China, they are mostly concerned about exports from China. The key driver for the pulp in China is tissue, and tissue is mostly internal consumption in China. We don't see actually any reason why it would not restart after the Chinese New Year.
In pulp, it's clear. We'd already start recovering and based on domestic consumption, so we are positive. Paper. First question on paper, why do we see this table even though it started to increase? We see it's stable for our own price. Why? This links to your other question, because our mix of sales will be slightly less rich. We plan to sell a lot more paper in 2019, but the increase in paper quantity sold will not be premium paper because as you know, we already have 50% market share of premium. The additional quantity of paper sold will be at a lower price. Therefore, the mix impact here will be playing against us. It's a poorer reach of a much larger quantity, but therefore the price will be not increasing. It will be stable.
I think this answers your last question, how we see the paper mix evolving. As I said, key priority for our sales team in paper in 2019, production allowing, will be to sell a lot more, but we'll be selling a lot more standard and some economical. Premium, we are close to what we can sell from a market perspective. I hope this answers your questions.
Yes, very clear. Thank you very much.
Thank you. The next question comes from Nuno Estácio from Haitong Bank. Please go ahead.
Hi. Good morning, everyone. A couple of questions, if I may. The first one in terms of volumes. After this year was a little bit weaker, should we expect production levels to come back to 2017 figures or could they even be above, especially in terms of paper? In the pulp, considering this expansion of capacity, could you also give us some indications of what you expect in terms of production level for 2019? The second theme is regarding the CapEx. Recurring CapEx level was quite high this year. I think that your message has been that next year you also have some investments related to environmental schemes. Could you confirm us that in 2019, the recurring and maintenance CapEx will also be relatively high? My question would be also in 2020, do you expect this level of maintenance CapEx to moderate?
If you could tell us how much do you, although obviously it's not budget yet, but what would be an acceptable or a normalized level? The final question is, I've seen your last comments in terms of the bioeconomy investments. How much could this mean in terms of CapEx, in terms of cash flow? Thank you.
Very good, Nuno. Thank you for your three questions. I'll take the first two, and João Paulo will take the last one. Volumes for 2019. Paper, pulp, and tissue, it's very simple. We anticipate to produce a lot more than 2018, and also than 2017. As you know, if I start backwards in tissue, we now have a new machine, we have got to produce a lot more. In pulp, we have had also a large expansion, and when you have an expansion, it has two impacts. The first impact is that you then benefit from the expansion, but also the next year, you don't have the stoppage that you had to do for the expansion. The increase in production is quite significant at constant stock levels.
Finally, in paper, we will have our usual creep. If we don't have any hurricane or any large issue, and we had some this year, namely also the stoppage for the PM3, which also did steal some production. We anticipate to have more production of paper. Huge difference in tissue, some difference in pulp, smaller, but still some difference in paper. That's for the volumes. CapEx. As you know, we do not give guidance except on CapEx. It's true that we anticipate 2019 to be strong on the regulatory front. This would mean that we could anticipate CapEx anywhere between EUR 120 million and EUR 150 million, let's say, depending on how things go. For the first question on the bio, CapEx could be associated namely to the two key projects that João Paulo mentioned. I will hand over to him. João Paulo.
We have planned for the first project, bio essential oils, CapEx of approximately EUR 10 million. For the second project, we are still under evaluation, and we will not be able to disclose any figures at the moment.
I hope that helps answer your three questions then.
Yes. Just coming back to CapEx, when you mentioned your EUR 120 million-EUR 150 million, this is only maintenance CapEx? It does not include any project expansion or anything like that?
This is what we plan currently.
Okay.
We have no specific plans, as you know, currently for 2019.
Okay. This is a huge amount compared to what you have been doing. Can you detail us a little bit more what you will have to do?
The key topic here is the regulatory front. As soon as we have the numbers more fine-tuned, we will share them with you. We're talking about a very large investment that will be needed here in Setúbal, which will be several tens of million EUR. That's why the number is so large. I also gave you a bracket. I know well that it's large. It's the traditional recurrent and maintenance CapEx. We have two, one very large issue in Setúbal and another one in Figueira da Foz with the biomass boiler. That's why it will add up to a number anywhere between EUR 120 million and EUR 160 million. To your question, does this mean expansion? No.
Okay. Thank you.
Thank you. The next question comes from Benoit Ducatillon from Degroof Petercam . Please go ahead.
Hi. I have two questions. First one is, can you give us more color on the reasons of the non-renewal of your mandate? The second one is, when can we expect more clarity on dividend policy going forward? Thank you.
Hello, Benoit. Thank you for your question. Diogo will answer the question regarding the mandate at the end, and he will now make a few comments on the issue. Okay?
Okay.
On the dividend. Very good. As you know, we have had, over the last years, a very consistent dividend policy. The indications we have at the board level is that there is no anticipated change, actually, in the dividend policy. I think the best guess for tomorrow is yesterday's numbers. I would not anticipate any change in the dividend policy.
Okay, thanks.
Thank you. Ladies and gentlemen, there are no further questions. I now give back the word to the company. Thank you.
Very briefly, taking your question on the non-renewal. I have to say that I embraced the challenge five years ago, defined by our dear Pedro Queiroz Pereira. The challenge I was offered was to diversify and renew something I believe with the team I lead, with commitment and enthusiasm and together with everyone here in the company. As you know, we've diversified, namely with tissue. We've acquired a company, increased fourfold the capacity of that operation of that unit. We have rejuvenated a lot the group. On average, the age of the people at Navigator today is almost four years below what it was five years ago. We have a rejuvenating program for people who want to retire a little bit earlier.
We were able, thanks to the investment that our shareholders allowed, we were able to recruit almost 1,000 people more over five years. I believe we have achieved basically the goals that we were supposed to achieve. All that in, as you know, in a reasonable evolution of the profitability, which we were lucky to be in a positive factor context. EBITDA, as you know, has grown every single year from EUR 328 million -EUR 455 million this year. At the same time, we were able to invest a total of EUR 730 million. On the other hand, over this period, we launched a new corporate brand, as you know, and worked on management methods with a significant effort to renew the image of the company. Today, Navigator sits on the board of WBCSD. We have just referred A rating for climate action, issued the first green commercial paper.
I think the company is in a fantastic shape, strong, prepared to face risks as well as opportunities. I felt that it was a cycle for me, and that the time has come to close this chapter, let's say, of my professional life. This is a personal and wide decision. We will now be focusing together with João, our Chairman, who will also become CEO after the general assembly. We will work together with the executive committee to bring Navigator to a further step. This is the view. I came in, the company was fantastic. I leave the company even better. I am sure those that will come after me will make it even better.
Ladies and gentlemen, if you want to ask a question, please press zero one on your telephone keypad. Thank you. There are no questions on the conference call. I give the floor back to Joana. Thank you.
Thank you. I will now ask João Castello Branco, Chairman of the company, to make a brief statement.
Thank you, [ Diogo ] and Joana. Good morning to everybody. I just wanted to make a small statement, which I believe is appropriate on this occasion. First of all, I would like to convey the appreciation of the board and my personal thank you to Diogo for his leadership of the company over the last five years. As he has just said, much has been achieved during this period. The base for diversification of the company has been set, and the number of transformational elements in its talent management, internal processes, and corporate image have been introduced. The company has also significantly strengthened its track record as a leading sustainable company. This has been achieved in a context of very solid results, which are a tribute to the improvement efforts underway and the company's ability to successfully navigate the favorable pulp pricing environment.
At this point now, our main focus is to ensure we keep the strong momentum and the seamless transition. Diogo will continue until April 9th, when the current mandate finishes. The plan is that I will take over from him on that date. Except for Diogo, it is our intention that the executive team will remain unchanged. Our common focus will be to continue the good work that has been done so far, including a relentless focus on delivering the budgeted results in our core uncoated wood-free and pulp business. Continued industrial and commercial excellence, as well as a focus on efficiency will be key. Fully getting up to speed on our new tissue machine and further strengthening a winning tissue business model, maintaining the momentum on the transformational efforts underway and on our sustainability agenda.
The board will also be working on finding the best leadership solution for the company moving forward. This will take the time needed and will be announced when completed. Until then, our relentless focus of Diogo, myself, and the executive team will be on the above agenda. We are absolutely confident on the ability of the company to deliver on it. Thank you.
Thank you, João. This ends our call for today.